Posted at 3:47 AM (CST) by & filed under Guild Investment.

Dear CIGAs,

Policymakers have a duty to “Eliminate as completely as possible all of the inbuilt elements that are amplifying the booms and busts,” a quote in today’s Financial Times by Jean-Claude Trichet, the President of the European Central Bank.

Let us hope that Mr. Trichet is speaking of derivatives and not just excessive leverage. If derivatives continue to be manufactured we will have more busts and more booms. Derivatives which amplify leverage must stop being created and must be transacted through a documented clearing intermediary. Derivative sellers must use only strong and viable counterparties.

We believe that today was a major cycle turn day and the rally in gold was a result of dollar weakness. Today’s price action demonstrates to us that the dollar strength has ended and a new downtrend in the US dollar was established about 8 trading days ago. In our opinion, this is bullish for gold.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Posted at 3:12 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

I am just returning from a short trip and am unable to put together much of a commentary on today’s market action so please reference the chart for the technical picture. I do want to note however that the HUI is trading above the 100 day moving average, a significant technical achievement. The XAU has not quite mustered the strength to best that level but the session high from yesterday and its current session high is right on that level so it is attempting a breakthrough. Should both indices manage two consecutive closes above that level, especially with the 10, 20, 40 and 50 days all turning higher, it will be difficult for even the most die-hard gold bear to argue against the move.

The fact is that the US Dollar’s horrendous fundamentals have caught up with it. The bear market rally caught a tremendous amount of speculative longs on the wrong side as the bottom fell out of it. We have remarked in the past that the rally in the dollar had NOTHING to do with fundamentals or safe haven buying as the talking heads in the press would have you believe but was rather the effects of a short-lived but massive repatriation of investment funds from abroad by US based hedge funds looking to deleverage, cut losses and meet margin calls and redemptions. I am particularly interested in what it is going to do after the new year begins as that will be the key to many other markets.

Click chart to enlarge today’s action in Gold as of 12:30pm CDT with commentary from Trader Dan Norcini

December1608Gold1230pmCDT

Posted at 6:39 PM (CST) by & filed under General Editorial.

My Dear Friends,

Once again the gold banks stole your golden candy. They will do it again tomorrow and continue until they really have to trade real gold.

My question to the most financially able among you is as follows:

Have you had enough of the daily short side manipulation carried on by the same people blatantly on the floor of the make believe gold paper gold exchange, the COMEX? Over the weekend they thumbed their noses at you in an article concerning the increase in delivery taking. The COMEX member quoted laughed at us saying they had a warehouse of $8 billion that was too big to feel any effort to take delivery.

Maybe Madoff didn’t know about the COMEX. $8 billion in today’s world is chump change, however the chumps at the evil COMEX can’t count the amount of fingers they have.

To our most financially able readers, those who have all the physical gold they want, it only takes 21,000 one hundred ounce bars taken delivery of and removed from the COMEX to convert that market to a cash market from a make believe no gold, paper gold market and price maker.

STOP THE COMEX.

Respectfully yours,
Jim

Posted at 2:02 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

With a feeding frenzy to point out how the biggest of the big can be major turkeys, no one has asked the inviting question, what did he do with the money? It is hard to spend billions on oneself.

Top banks admit huge losses in Wall Street ‘pyramid’ fraud
Dec 15 09:11 AM US/Eastern

Top world financial groups on Monday revealed massive potential losses from an alleged scam run by Wall Street trader Bernard Madoff, admitting they were fooled by a classic pyramid investment fraud.

British, French, Japanese and Spanish banks and funds said investments totalling billions of dollars (euros) could be wiped off their balance sheets by a scandal that is set to affect some of the richest people in the world.

Royal Bank of Scotland said it could lose about 400 million pounds (598 million dollars, 444 million euros), joining a growing list of banks and investors in Europe, Asia and the United States struck by the scandal.

Shares in Santander, the biggest bank in Spain and the second largest in Europe after HSBC , plunged after the lender said it had an exposure of more than three billion dollars to Madoff Investment Securities in New York.

France’s Natixis investment bank, already brought low by subprime losses, put its maxiumum exposure at 450 million euros (606 million dollars). Retail banking giant BNP-Paribas revealed potential losses of 350 million euros.

More…

Jim Sinclair’s Commentary

Where is the money?

Wall Street ‘fraud’ victims continue to rise
December 15, 2008

The list of institutions and individuals set to lose billions of pounds after investing in a fund run by Bernard Madoff, the Wall Street broker and former Nasdaq chairman, is growing by the hour.

The list of institutions and individuals set to lose billions of pounds after investing in a fund run by Bernard Madoff, the Wall Street broker and former Nasdaq chairman, is growing by the hour.

Royal Bank of Scotland (RBS), the bank majority-owned by the Government, today admitted that it had an exposure of £400 million to the $50 billion alleged fraud.

It joins Man Group, the world’s largest listed hedge fund manager, HSBC and Santander, the Spanish group that owns Britain’s Abbey, Alliance & Leicester and Bradford & Bingley, which are exposed to Mr Madoff’s business.

More…

Jim Sinclair’s Commentary

The moment these non US entities dumped Fanny and Freddie and jumped into practically no interest US Treasuries for safety, the US dollar rally crumbles and kicks those geniuses in the rear.

Foreign investors fled agencies, bought T-bills
Monthly inflows hit record as investors sought safety from U.S. troubles in U.S. assets
By Laura Mandaro, MarketWatch
Last update: 1:47 p.m. EST Dec. 15, 2008

SAN FRANCISCO (MarketWatch) — Foreign investors shed their holdings of Fannie Mae and Freddie Mac debt after the U.S. government’s takeover of the floundering mortgage institutions, and instead piled into short-term Treasury bills, October data released Monday show.

The rush to safety lifted monthly inflows of net foreign investments in U.S. securities to a record high of $286.3 billion, said the U.S. Treasury in its monthly Treasury International Capital, or TIC, report.

The upshot was that foreigners increased their holdings of U.S. dollar assets even after the U.S. financial system delivered a list of historic failures and near-misses, including the September bankruptcy of Lehman Brothers, and then had its worst October for stock trading since 1987. See article on October trading records.

"For now, the U.S. dollar has reassumed its reserve-currency primacy," said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

Foreign private investors, central banks and other overseas institutions sold a net $50.2 billion in Fannie Mae and other government agency bonds in October, a reversal from the $6.2 billion in net purchases made in September, the U.S. Treasury said.

The rush for the exits followed the U.S. government’s decision to seize formal control of Fannie Mae and Freddie Mac after the government-sponsored enterprises – which had operated as independent, publicly traded mortgage financers with the implicit backing of the U.S. government – skirted near bankruptcy.

More…

Jim Sinclair’s Commentary

Oh what beautiful morning. Those that flamed the planet with their OTC derivatives and gold bearishness are becoming a bad chapter in world history.

Citadel joins rush to lock up funds
By Henny Sender in New York
Published: December 14 2008 19:00 | Last updated: December 14 2008 19:00

Citadel Investment Group has joined the rush of hedge funds suspending redemptions to investors, a development that is in effect locking up hundreds of billions of dollars in cash during a volatile period in global markets.

Ken Griffin, Citadel’s founder, sent a letter on Friday to investors in the group’s flagship Kensington and Wellington funds telling them that the group had decided to hold on to their money at least until March.

Citadel has about $15bn under management after suffering big recent losses.

Citadel trades in many of the markets hardest hit by recent volatility – including convertible bonds, corporate bonds, credit derivatives and so-called “pipes”, or private investments in public equities.

Citadel did not respond when called for comment.

Citadel joins a growing list of hedge fund groups – including Tudor, Farallon and DE Shaw – that have imposed restrictions on the ability of investors to withdraw money.

More…

 

Jim Sinclair’s Commentary

Kerry forgot to add to his statement the Pakistani Intelligence, the Pakistani Military Leaders, Pakistani Military Grunts and a significant amount of Pakistani civilians.

I imagine the Washington Post meant a great deal of the Pakistan population makes up the bad guys this article suggests be killed forthwith.

The more of this rhetoric, the closer we come to some entity with support from the US, Great Britain and others sending in troops. This will come after a major PR campaign to color the place all bad, making them all fair targets.

U.S.’s Kerry urges Pakistan to control spy agency

Mon Dec 15, 2008 8:05am EST

NEW DELHI, Dec 15 (Reuters) – The Pakistan military’s powerful spy agency must be tightly controlled and not allowed to act independently, U.S. Senator John Kerry said on Monday after meeting Indian leaders to discuss the deadly Mumbai attacks.

India has blamed last month’s attacks that killed 179 people on the banned Islamist militant group Lashkar-e-Taiba, which analysts say has long had ties with the Pakistan military’s Inter-Services Intelligence (ISI) spy agency.

New Delhi has also demanded Islamabad do more to stop such militant groups from using Pakistani soil to launch attacks on Indian cities.

The Mumbai attacks have renewed suspicion in India and elsewhere about ties between Lashkar and the ISI, ratcheting up tensions between the nuclear-armed neighbours.

"In the United States, our intelligence agency is obviously held accountable, not just to the administration that runs it but also to the United States Congress and, through the Congress, to the people," Kerry told reporters in New Delhi after meeting Indian Prime Minister Manmohan Singh.

More…

Posted at 1:48 PM (CST) by & filed under General Editorial.

AgesofGoldDear CIGAs

I want to bring your attention to some recent correspondence I had with Timothy Green, a veteran journalist and seasoned gold bug. For almost three decades, Green worked as a consultant on the annual gold surveys of Consolidated Gold Fields and Gold Fields Mineral Services (now GFMS), focusing on the Middle East, India and the Far East.

His first book, "The World of Gold," came out in 1968 and has been revised several times. His latest book, “The Ages of Gold,” is reviewed below and no doubt will see several revisions in the years ahead. Green has written for Life, Fortune, The Smithsonian, Readers Digest, the Observer and several other major publications and is eminently qualified to discuss the often complex but never boring subject of gold.

Green believes that gold’s safe haven status has become a key driver in the current marketplace, noting its strong performance against several major currencies including the Euro and Sterling. He’s also certain that "grassroots gold buying of coins and small bars will continue – and, importantly, people will hold that metal for a long time. That kind of buying is not a quick trade, but a generational thing."

"In 1930s in similar situations Europeans became great hoarders of gold coin, especially in France, Belgium and Switzerland, and hung on for decades. When I first looked at the gold market in Paris in l966 the story was still the hoards under the bed and in the cabbage patch. In short, a new generation of long term hoarders is being established," he pointed out.

Green sights Ralph Hawtrey, a distinguished economist at the British Treasury in the late l930s who remarked: "There is a very real convenience in using metallic reserves. Other assets take the form of debts, and every debt depends for its value on the person and local situation of the debtor. Gold is an anonymous asset, and is capable of transportation from one place to another without retaining any link with the place of origin."

"In writing my book, The Ages of Gold, I noted that Hawtrey’s perception of the metal as a unique asset remains true to this day. Thousands of small investors now buying gold coin and small bars seem to agree," he said.

The Ages of Gold is the story of the mines, the markets, the goldsmiths and the merchants who over the past 6,000 years made gold a symbol of wealth and power. Green chronicles gold’s origins in Mesopotamia, Egypt, Troy, Minoan Crete, Greece, Rome, Byzantium, Pre-Columbian South America along with the voyages for West African gold by the Phoenicians. His carefully crafted, well-illustrated 480 page tome masterfully links the modern world of gold with the ancient one which is no small feat.

The Ages of Gold is available online at the GFMS website (http://shop.gfms.co.uk). While you are there, don’t forget to check out their annual gold, silver and other metals surveys which are renowned throughout the minerals industry.

Posted at 5:15 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Pakistan, a rolling disaster becoming visible.

The Washington Post recently said that if Pakistan won’t or can’t uproot its home grown terrorists groups, said Robert Kagan, the world would have to step in. The international community should declare parts of Pakistan, "ungovernable" and send troops to help the Pakistan government round up and kill the bad guys.

The article goes on to ask itself "would this violate sovereignty? Of course it will answers the author. He went on to declare that nations should not be able to declare sovereign rights when they cannot control territory from which terrorist attacks are launched.

That seems to me like a slippery slope into financial and geopolitical Armageddon when the nation under discussion is nuclear capable with delivery systems. Keep in mind the military and intelligence is pro-Taliban. It seems to me the first to battle is not the government but rather the military with plans predicated on intel.

This is not Iran, Iraq or Afghanistan that truthfully lacks world class teeth. They do not vaporize their invaders, they just practice the age old strategy of bury your weapons, all fall down, now when the invading nation ensconce themselves, get up, get your weapons and bleed the enemy slowly using ancient technology until the war drains the invading nation to death.

This bunch can throw nukes if they deem themselves to be facing a force beyond their ability to repulse by traditional means, considering it not help but rather invasion. The government that the Washington Post has deemed a non nation’s present government has said, "do not do that." We will consider your offer of help if executed as an invasion of our sovereign territory.

There will be an invasion of Pakistan soon, by someone supported by the USA, GB and Israel. That you can be sure of.

Pakistan ‘linked to 75% of all UK terror plots’, warns Gordon Brown
December 14, 2008

Sam Coates, Chief Political Correspondent, and Jeremy Page, South Asia Correspondent, in Islamabad

Gordon Brown demanded "action, not words" from Pakistan today, blaming Pakistani militants for last month’s attack on Mumbai and revealing that three quarters of the gravest terror plots under investigation in the UK had links to Pakistan.

Winding up a two-day tour of Afghanistan, India and Pakistan, the Prime Minister urged Asif Ali Zardari, Pakistan’s President, to "break the chain of terror" linking Islamist militants in Afghanistan and Pakistan to attempted terrorist attacks in Britain.

British military officials believe there are a "handful" of British militants fighting alongside the Taleban in Afghanistan, often entering the country through northern Pakistan, where al Qaeda and Taleban leaders are thought to be sheltering.

Officials also believe that there are currently around 30 major terrorist plots in the United Kingdom with 2,000 suspects being watched by police and the intelligence services.

"Three quarters of the most serious plots investigated by the British authorities have links to al-Qaeda in Pakistan," said Mr Brown in a press conference alongside Mr Zardari in the presidential palace in Islamabad. "The time has come for action, not words."

More…

 

Jim Sinclair’s Commentary

The financial problems are behind us? Not a chance. What OTC derivatives did not do, imploding earning and litigation will.

Wall Street shock as Goldman Sachs is expected to post losses of £1.35billion
By DAILY MAIL REPORTER
Last updated at 8:09 PM on 14th December 2008

As the shock waves of former Nasdaq chairman Bernard Madoff’s arrest over an alleged £33.5billion fraud continues to reverberate around Wall Street, dealers in New York are braced for yet more grief from the battered banking sector.

For the first time in a decade as a publicly listed company, Goldman Sachs is expected to report a loss for the fourth quarter tomorrow.

Analysts believe chief executive Lloyd Blankfein could post a loss of £1.35billion caused by further huge write-downs on the value of its investments and a fall in revenues as investment banking, sales and trading activity all take a further downturn.

The firm’s revenue for the first three quarters fell by almost 33 per cent from a year earlier, as investment banking fees dropped 26 per cent and trading and principle investment revenue slid 45 per cent.

Goldman, which converted into a bank-holding company in September to help it survive the global credit crisis, last month slashed about 3,200 jobs or one tenth of its staff.

More…

Jim Comments on President Elect Obama’s appointments:

There are two similarities pervading Obama’s appointees.

1. Harvard University
2. Intellectuals.

Therefore decisions made will be from the overeducated and lead to impractical programs and solutions following closely to a liberal manifesto.

There is a tendency when you are surrounded by what boils down to same university fraternity house to have formed a team of YES people.

 

Jim Sinclair’s Commentary

The good guys at GATA bring this to our attention

Trace Mayer: A problem with GLD and SLV ETFs
Submitted by cpowell on 08:25AM ET Sunday, December 14, 2008. Section: Daily Dispatches
11:20a ET Sunday, December 14, 2008

Dear Friend of GATA and Gold:

In an essay published yesterday, Trace Mayer, an accountant, lawyer, journalist, and proprietor of the Internet site RunToGold.com, has done a wonderful job exposing the weaknesses of gold and silver exchange-traded funds, as those weaknesses are acknowledged in their own prospectuses. Mayer observes, "There is no assurance that the ‘gold’ held in the ETFs is actually the same gold as defined under the periodic table."

Mayer’s essay is headlined "A Problem with GLD and SLV ETFs" and you can find it at Run To Gold here:

http://www.runtogold.com/2008/12/a-problem-with-gld-and-slv-etfs/

Posted at 5:13 PM (CST) by & filed under Jim's Mailbox.

Jim,

I would like to congratulate you and Peter about your article on hyper inflation.

I lived in Brazil and this is exactly what happened.

A Dragon named Inflation

I lived in Brazil during the 1960s and 70s, so I have an idea of what rampant, uncontrolled inflation can do. At its worst, the currency was losing about 30 to 40% of its value each month. This explains how 1 = 1 came to be 1 = 0.00000000000000001, or whatever. This page is supposed to give the reader an idea of what happens when you live where inflation is out of control. Please understand that in the last eight years, things (I mean the annual inflation rate) have been fairly good by Brazilian standards, even if the real (as Brazil’s currency is now called) is under a lot of pressure from many different areas (exports, government spending, foreign debt, etc…). This page looks back at life and money in Brazil in the last forty years or so.

The president’s monetary policy vs the dragon. Brazil humorists have a lot of fun with inflation, and the public is always skeptical of their ability to control the dragon. For some reason, inflation is often symbolized as a dragon, just as the income tax is a lion. Anyway, in the cartoon, the dragon is not impressed with the new real currency.

A high inflation rate means you do to bed with $100 in the bank (or in your pocket) and wake up with $98 or 99, and on the next day you have $96, without spending a penny (well, acentavo). It also means when you get paid, you immediately go to the market for groceries and/or stores to purchase any basic goods you may need. This page is about Brazil’s battle with the evil dragon viewed though it’s paper money .

For most of the early part of then 20th century, Brazil’s money was called Reis, meaning "kings". By the 1930s the standard denomination was Mil Reis meaning a thousand kings — that is alot of blue blood flowing on the market.

By 1942 the currency that devalued so much that the Vargas government instituted a monetary reform, changing the currency to cruzeiros (crosses) at a value of 1000 to 1. Twenty thousand reaisbank notes were stamped as twenty cruzeiros, as seen in the example here. Over the next fifty years, the poor stamp overlay machines were to stay busy. As you will notice on this page I have tried to find paper notes "stamped" (carimbadas) with the new values. These notes remained in circulation a few months until the new "official" notes with the new denominations became available.

More…

We don’t know when Hyperinflation will come to the US but it will come.

When you will start seeing prices of essential goods rising, this will be it. But people on the street shouldn’t trust the government inflation numbers! We just have to go regularly into the supermarket near us to find out as hyperinflation may well be worldwide.

By reading Peter’s Formula, I noticed that the vicious cycle is maintained by a weak government (see part 9 of the 10 steps) policy such as printing fiat money in unreasonable ways. In Brazil, in the 70’s, we had dumb government solutions such as price readjustment indexes.

In the US, Volcker with its strong monetary policy helped stop this vicious cycle in the 70’s by raising rates to unprecedented levels. Will Obama follow Volcker’s steps at one point of his presidential mandate? I don’t think so or maybe a long way down the road.

Thank you for all!
Best regards,
CIGA Christopher

Dear Christopher:

Thanks are to Peter, a man of rare perception, a true student of economic history and a man to be reckoned with. When introducing his economic committee, President Elect Obama said no less than six times that this group would disagree. The liberal economic policy will be followed with ever expanding Fiscal Stimulation along with both the Fed and Treasury continuing to bail out every major entity that falls.

Respectfully yours,
Jim

Posted at 11:04 PM (CST) by & filed under General Editorial.

Dear Friends,

This incisive article by Peter Shann takes us from the shock of the creation of more dollars than ever anticipated being ploughed into both financial and industrial concerns to the mechanics of how hyperinflation is created and why it is now unavoidable. All of this was caused by the implosion of the huge mountain of garbage paper, over the counter derivatives.

In terms of forward discounting markets, this could be marketwise tomorrow.

Farming is a credit-based business that has for months been discussed not in terms of farming products, but rather in the sense of its impact on demand in the market for critical products to the farming process. Primary focus has been aimed at South America but applies everywhere.

Grains and meats, as all edibles, certainly qualify as necessities to life. Electricity, heating oil, housing, and medicine are part of what is necessary for life, itself.

Dislocations in supply are easiest to understand when viewing today’s decision to support Motors from the US Treasury. There is still no clear answer if the suppliers to Motors are willing to do business as usual in terms of delivering goods for payment 45 days later. It seems as if supplier will not be happy with this traditional manner of doing business. It may be like beer suppliers to a questionable credit that is “cash on hand,” or no beer.

So here are two examples that will be repeated many times but in the same way as we move faster and faster toward the unseen CONSEQUENCES of a broader and ass backwards approach to the business of government and commerce. That is best understood as when you reward non-production and punish production. The result is ALWAYS non-production.

You would assume that extremely difficult business conditions would be accompanied by an oversupply of all kinds of goods and services, but hard logic and history prove otherwise.

Simply stated, both on the micro and macro level, the present credit lockup and lack of confidence between lender and borrower, between supplier and consumer, and eventually between international suppliers and the currency of the world’s major manufacturer of currency will be the process of why the present unprecedented air bombing of cash (US dollars) will result in hyperinflation as unprecedented as is its cause.

Do some introspection. Does a supply of essential goods seem attractive to you? If the answer is YES here are the mechanics of what you have intuitively understood

Read the following slowly with your major focus on the steps numbered one through ten.

We will name this Peter’s Formula, the natural outcome of Jim’s Formula.

Jim

The roots of hyperinflation
I have written the following because I do not think the dangers of hyperinflation and currency collapse are understood;
Peter Shann

The most widely accepted view is that hyperinflation and monetary collapse results from governments introducing large amounts of fiat money into the economy, Wikipedia comments;

"The main cause of hyperinflation is a massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services. This results in an imbalance between the supply and demand for the money (including currency and bank deposits), accompanied by a complete loss of confidence in the money, similar to a bank run"

This explanation is superficial and doesn’t provide answers as to why governments would in the first instance "massively and rapidly increase the amount of money" nor why they would.

feel compelled to continue with this as inflation increases by factors of thousands of percent and in some extreme instances print banknote in denominations of 100,000,000,000,000 currency units, it also fails to explain why newly issued money is not primarily invested in asset class goods or why goods that can easily be replicated, as can most essential consumables, be often subject to the greatest price inflation.

A prerequisite of hyperinflation and monetary collapse is that a disruption in the availability of essential goods occurs, today this could happen as a result of past reliance on expanding credit and fiat money temporally facilitating dependency on low cost imported goods many of which now feed primary needs leading to a commensurate loss of home production capacity with an inherent delay to the medium-term should such reengagement with manufacture become necessary as it would in the event of off shore suppliers losing confidence in reciprocal worth of monetary instruments offered in exchange for goods, and or shortage of essential goods may arise as a result of natural correction occurring, by way of example from the collapse of speculation driven credit markets and or as a result of collateral damage to the production cycle caused by inappropriate governmental action in further increasing money and credit supplies in attempt to drive a spontaneously occurring and necessary correction back in the direction of instability and in so doing distorting essential work ethics and disincentivising investment in the production cycle,

In my view the most probable sequence of events resulting in hyperinflation and monetary collapse is as follows:

1. A broad based shortage of goods that are thought essential develops and this is not relieved in time to satisfy demand.

2. Consumers trying to acquire essential goods that they believe are in short supply become fearful and are prepared to pay increasingly higher prices and stockpile these goods further increasing shortages and accelerating prices as a sellers market develops.

3. Prices rise for essential goods in short supply as an increasing proportion of the money supply circulates in these goods, also with increasing velocity and as most of these goods are consumables with high turnover upward re pricing quickly occurs.

4. The proportion of available money circulating in goods that are perceived as essential increases and the demand for less essential goods diminishes I.e essentials become disproportionately more expensive than the norm against non essential goods displacing money towards the goods most in demand further fuelling inflation,

5. The shortage of essential goods accelerates as manufactures increasingly focus on short term survival, longer term risk is avoided and investment in the production cycle is reduced accelerating 1.

6. The normal balance of demand for all goods increasingly prefers those goods required to satisfy primary needs and people engaged in making and supplying less immediately essential or non essential goods become unemployed who then pressures governments accelerating condition 9.

7. Eventually goods not immediately required but non the less essential are needed and rapidly increase in price as they also become in short supply.

8. Consumers with least money first find it increasingly difficult to secure essential goods, become frightened and are forced to allocate greater proportions of their money on essential goods and demand greater income,

9. The demand for money forced by need and fear becomes irresistible so governments feel insecure and provide increasing amounts of fiat new money,

10. Consumers first to spend the new money see some value but soon as this new money is distributed and its value is lost, the velocity of money also accelerates as people rapidly exchange money for goods, wealth is seen as best protected when stored as goods rather than cash further increasing price and reinforcing condition 9,